Economics and Competitiveness Branch, Alberta Agriculture and Forestry

©2020 Government of Alberta | Published: April 2020

Consumer behaviour during COVID-19

While consumer behaviour changes over time, the

COVID-19 pandemic is forcing consumers to change

their behaviours and lifestyles at a speed and scale

unlike ever before.

Market research data provides insights on consumer

spending patterns in key global markets during this

pandemic. Some of these findings are shared in this

issue to help Albertans and the Alberta agri-food

sector to understand market changes and plan for

what comes next.

Nielsen,1 after analyzing global market data, has

identified six key consumer threshold levels (Figure

1) that tie directly to consumer concerns around the

COVID-19 pandemic. According to their analysis, as

of April 9, 2020, Canadian consumers were in

threshold number five, where living is restricted.

Alberta announced its first case of COVID-19 on

March 5, 2020. Since then consumers in Alberta

have gone through most of the phases. Phase three,

where consumers started pantry stockpiling, was the

most impactful for the food sector. Until the end of

the third week of March, Canada was in phase

three, where consumers were stockpiling their pantry

with shelf-stable foods and a broader assortment of

health and safety products. In this stage, store traffic

increased significantly with bigger basket sizes.

During the time when Canada was in phase four,

consumers were preparing for quarantined living.

Consumer store visits declined and they began

online stockpiling. That situation lead to more out-of-

stock situations, which put additional strains on

retailers and the supply chain. This also put logistical

pressure on home delivery networks. The fact that

major retailers such as Walmart, Loblaw and Save-

On-Foods have been hiring thousands of employees

1 Nielsen is a global measurement and data analytics company that provides views of consumers and markets worldwide.

to keep up with the grocery demand is evidence of

this pressure.

Threshold five, ‘restricted living’, where Canada was

as of late April 2020, has severely restricted

shopping trips. Online fulfillment has also been

limited. The current situation in the U.S. is the best

example. On March 16, 2020, Amazon announced

that they were investing in opening 100,000 new full

and part-time positions across the U.S. in their

fulfillment centres and delivery network to meet the

surge in demand. The logistical difficulties and

labour costs of fulfilling food shipments may have

lead to increasing food prices in some cases.

Author: Jeewani Fernando Provincial Consumer Market Analyst Competitiveness and Market Analysis Section Economics and Competitiveness Branch Phone: 780-415-9773 Email: jeewani.fernando@gov.ab.ca

The views and opinions expressed in this article are those of the Economics and Competitiveness Branch and do not necessarily reflect the official policy or position of the Ministry of Agriculture and Forestry or the Government of Alberta. Analysis performed within this article is based on limited and open source information. Assumptions made within the analysis are not reflective of the position of the Ministry of Agriculture and Forestry nor the Government of Alberta.

Economics and Competitiveness Branch, Alberta Agriculture and Forestry

©2020 Government of Alberta | Published: April 2020

Figure 1: Key consumer behaviour thresholds

Source: Nielsen

Note: These represent typical markers of these stages, but are

not always consistent, especially with the number of cases or

deaths.

As observed in other countries, when consumers are

progressing through these stages, their thoughts

and actions may change. Nielsen’s ongoing

investigation into the pandemic has found shoppers

are exhibiting signs that they may begin to steer

away from products that travelled long distances

with multiple human touchpoints. That means,

products that come off factory lines or rely on

distribution systems from some of the hardest hit

countries could face challenges, and multinational

brands will need to work to maintain consumer

confidence.

Evidence from retail sales data

Nielsen’s weekly retail sales performance summary

reports provide evidence for their consumer

behaviour model in Canada.

As stated above, Canadian consumers were in

threshold number three around the third week of

March 2020. According to Nielsen, the week ending

March 21, 2020 recorded a record setting pace of

sales of nearly three billion in Fast Moving

Consumer Goods (FMCG). This category of goods

includes food. Compared to the same week in 2019,

this is a 54 per cent increase in sales. Regional data

showed record sales growth for all Canadian

provinces (Figure 2).

Economics and Competitiveness Branch, Alberta Agriculture and Forestry

©2020 Government of Alberta | Published: April 2020

Figure 2: Regional sales growth for groceries during

the week ending March 21, 2020

Source: Nielsen, MarketTrack, National All Channels, week

ending March 21, 2020 vs one year ago

Total Tracked Sales including Fresh Random Weight

Corresponding to the next threshold (number four),

during the last week of March 2020, FMCG sales

reported a drop of $700 million from the previous

week. However, this was still 18 per cent higher

compared to the same week in 2019. As illustrated

in Figure 1, reasons may include declining store

visits and rising out-of-stock situations. The weekly

sales of FMCG shows this trend clearly (Figure 3).

Figure 3: Weekly retail FMCG sales for the year

ending March 28, 2020

Source: Nielsen, MarketTrack, National All Channels, week

ending periods.

Total Tracked Sales including Fresh Random Weight

2 Field Agent is on-demand platform for retail audits, mystery

shops and market research. https://www.fieldagentcanada.com/blog/daily-panel-pulse-check and https://ca.fieldagent.net/client/dashboard/#/results/job/32520

Quick surveys conducted by the Field Agent Daily

Panel Check2 reports some out-of-stock categories

were observed by Canadian consumers during this

period. Fresh produce, fresh meat and seafood,

eggs, bakery, pasta/pasta sauce, milk products, rice

and some frozen products are among the top out-of-

stock food products in the physical supermarkets as

well as in online grocery orders.

The sales data provided by Nielsen reveal the top 10

growth categories for Canada during March 2020.

As illustrated in Figure 4, prepared foods,

refrigerated/dairy and frozen foods topped sales with

$348.0 million, $225.9 million and $196.6 million

respectively. With limited options to dine out and

consumers in the process of preparing for

quarantine living, these patterns were expected.

Increased sales of fresh meat and fresh vegetables

may indicate more meal preparation at home.

Sales of weekending March 28th is

still record breaking but lower than

Christmas and New Year’s

Economics and Competitiveness Branch, Alberta Agriculture and Forestry

©2020 Government of Alberta | Published: April 2020

Figure 4: Top 10 growth categories in Canada-

based on absolute dollar growth ($ millions)

Source: Nielsen MarketTrack and IQVIA, National All Channels –

Four weeks ending March 28, 2020 - Total Tracked Sales

including Random Weight Fresh

To put consumers’ food purchasing patterns from

groceries during COVID-19 into perspective, Nielsen

Canada has put together sales growth numbers for

centre of store food (dry, frozen and packaged/

bottled products), centre of store non-food and

perimeter of store products (fresh products, bakery

and deli) during March 2020. As illustrated in Figure

5, centre of store outperforms as consumer needs

suddenly change. Prepared food (dry grocery),

refrigerated, dairy, and frozen food category sales

increased as consumers reduce trips to stores and

favour products with longer shelf life.

3 Restaurants Canada. https://www.restaurantscanada.org/resources/impact-of-covid-19-devastates-restaurant-industry/

Figure 5: Canadian grocery category sales

percentages growth during March 2020

Note: Centre of store categories exclude general merchandise.

Source: Nielsen MarketTrack and IQVIA, National All Channels –

Four weeks ending March 28, 2020 - Total Tracked Sales

including Random Weight Fresh

What is happening in the foodservice sector?

Due to expanded lockdown measures and heath

authority recommendations, consumer access to

food service remains limited. According to

Restaurants Canada’s latest Restaurant Outlook

Survey,3 restaurant operators saw their sales

plummet over the course of mid-February to the end

of March (Figure 6). At the end of March, lower

revenues and social distancing measures imposed

by governments resulted in 53 per cent of operators

temporarily closing down their entire operation.

While some restaurants remain open for delivery

and takeout, many have laid-off workers or cut back

staff hours. According to an industry advisor,4 as of

the end of March 2020, the industry was down by

approximately $3 billion, representing a 72 per cent

loss in sales and 800,000 lost jobs.

4 Robert Carter of Straton Hunter, Foodservice industry analyst

Economics and Competitiveness Branch, Alberta Agriculture and Forestry

©2020 Government of Alberta | Published: April 2020

Figure 6: Survey responses to the question: Was

your total sales volume (on a same-store basis),

higher, lower or about the same as it was during the

same period 2019?

Source: Restaurant Canada’s Restaurant Outlook Survey

According to Techomic Canada,5 the future of the

foodservice sector looks dim. They forecast a

consumer foodservice spending contraction of 24

(best-case scenario) to 28 (worst-case scenario) per

cent for restaurants in the year 2020. Travel and

leisure related foodservice spending are predicted to

contract 46 to 60 per cent.

Technomic also reports the number of innovative

activities that the industry is taking to mitigate some

of the risk. These include:

Offering meal kits for their menu items

Selling essential supplies (food ingredients

and grocery items) from their pantries

Using wait staff to deliver orders

Adapting menu innovations, such as family

meal offerings, streamlining menu items with

limited options, etc.

They also predict that in the future, there will be

fewer operations with industry consolidation.

Demand will be higher for local/independent food

services. More and more restaurants will be

operating with streamlined menus and with their own

delivery services.

5 Technomic webinar: COVID-19’s Impact of Canadian Foodservice

Implications of COVID-19 on the agri-food sector

As explained before, there is a significant shift in

where consumers are buying food because of the

pandemic. While food use in large-scale

establishments, such as hotels, restaurants, sports

arenas/stadiums and universities suddenly declined,

the demand for food at grocery stores increased.

The industry assures that there are no nationwide

shortages of food. However, in the short-run there

are cases where the inventory of certain foods at

grocery stores are temporarily low leading to out-of-

stock situations, before stores can restock. As

mentioned above, surveys conducted by the Field

Agent Daily Panel Check, reports some out-of-stock

categories observed by Canadian consumers during

early April 2020.

Also, as identified in Nielsen’s consumer behaviour

thresholds, there was a surge in demand for online

ordering, home deliveries and takeaway foods.

While the businesses who already have systems to

accommodate such demand may be performing

reasonably well, those who do not may be

struggling.

The closure of many food service establishments

has created additional issues. Some product orders

originally destined for food establishments have now

been cancelled. This situation has affected many

food supply chains including some producers,

processors and distributors. Industry sources say

that supply chains are taking various measures to

mitigate the disruptions. Some examples include

diverting food products from food service

destinations to grocery stores and increasing

freezing and freezer capacities to store excess

production.

Another short-term impact is the issues in food

supply chains due to labour absenteeism and

shortages. As of mid-April 2020, there were a

Economics and Competitiveness Branch, Alberta Agriculture and Forestry

©2020 Government of Alberta | Published: April 2020

number of cases where food-processing facilities,

specifically meat processing plants, had to close or

reduce shifts. This situation may lead to some

shortages of food products and price increases in

some cases.

Many global markets are still in the middle of the

pandemic. However, there are some early signs that

consumer long-term behaviour will be changed by

COVID-19. Nielsen has identified three critical

accelerators that affect consumer behaviour.

1. Emphasize quality and efficacy

The pandemic experience will make

consumers seek greater assurance that the

products they buy are free of risk and of the

highest quality. This may require

manufacturers, retailers and other related

industry players to emphasise quality and to

clearly communicate why their products and

supply chains should be trusted.

2. Rise of local and be transparent

about local origin

Locally produced products may fast become

a necessity for consumers concerned about

products originating from countries where

COVID-19 has spread. More than ever,

shoppers want complete transparency from

farm to factory to distribution. They may

want details of the measures being taken to

assure food safety. Promoting a product’s

local origins could help manufacturers and

retailers mitigate some consumer concerns.

Local products and brands have been

gaining popularity across the globe over the

past couple of years.6 Consumers have

typically closely associated products of local

origin with supporting local business,

aligning with home-grown heritage or

6 Nielsen Insights. https://www.nielsen.com/ca/en/insights/article/2020/covid-19-concerns-are-a-likely-tipping-point-for-local-brand-growth/

seeking fresh foods grown close to home.

But as fears about COVID-19 spread,

consumer thoughts and actions are

changing globally which represents an

opportunity for retailers and manufacturers

to leverage the appeal of local to mitigate

consumer concerns.

3. Leverage technology

With lockdowns, limited access to physical

store shopping and many people working

from home, consumers will have greater

motivation and fewer perceived barriers to

actively seek technology-enabled solutions.

Companies that can leverage technologies

by meeting changing consumer demand

online have the opportunity to earn

consumer loyalty well after consumers’

COVID-19 concerns subside. Experiences in

global markets show that despite the

challenges (unprecedented consumer

demand outstripping the e-commerce

delivery capabilities of retailers) consumers

can quickly adapt their shopping behaviour

when they need to.

According to a recent survey,7 30 per cent of

Canadians are shopping online for groceries. This

marks a 58 per cent jump from a comparable survey

conducted just four weeks earlier, before the

coronavirus was declared a global pandemic.

Key Takeaways

The majority of consumers are concerned

about COVID-19 and, therefore, consumer

behaviour will continue to change affecting

the agri-food sector in many ways.

According to Nielsen’s consumer behaviour

thresholds, Canadians are under restricted

7 Grocery Business. Survey commissioned by PayPal. https://www.grocerybusiness.ca/news/57-spike-in-canadian-online-grocery-shoppers-report

Economics and Competitiveness Branch, Alberta Agriculture and Forestry

©2020 Government of Alberta | Published: April 2020

living with severely restricted shopping trips,

increasing online shopping but with some

limitations to fulfilments and limited stock/out

of stock situations.

The retail sector reported record-breaking

sales during March 2020 with prepared

foods, refrigerated/dairy and frozen foods

topping the list.

Lock down measures and social distancing

have severely affected food service industry

operations. Consumer spending on

foodservice are forecast to contract by 24

(best-case scenario) to 28 (worst-case

scenario) per cent for restaurants in 2020.

COVID-19 impacts on retail and the food

service sector have trickled-down to other

members of the food supply chain, such as

producers, processors and distributors.

There are some early signs that consumer

food purchasing patterns may change

permanently. As market data and research

suggest, product quality and transparency,

local products, and technology solutions for

product purchases, are the most important

factors for consumers. Agri-food companies

who can leverage these factors will have a

greater chance of performing well in these

turbulent market conditions.